The Ninth Circuit Deems the Compensation of Outside Medical Reviewers Relevant in LTD Litigation, in Demer v MetLife

So the other particularly fascinating item – to me, anyway – that popped up in my twitter feed while I was on vacation was this important decision by the Ninth Circuit, Demer v. IBM and MetLife, addressing whether (and, if so, how) the number of reviews done by, and compensation earned by, outside medical reviewers used by an insurer to evaluate long term disability claims is relevant to arbitrary and capricious review. In short form, the majority of the panel found (at least implicitly) that evidence of this nature is discoverable in a case governed by arbitrary and capricious review, and must be considered by a court in passing on the question of whether a decision to deny benefits was arbitrary and capricious. A dissenter points out this evidence may be superficially appealing, but that if looked at critically, it should not be given any weight.

I have a number of thoughts on this decision. First, LTD insurers routinely use outside medical reviewers in exactly the way they were used in Demer, and there is nothing wrong with doing so. As I have often argued, the sheer complexity of many conditions require administrators to make use of outside medical reviewers, and it is questionable whether a proper review can be done in many cases without one or more such reviews.

Second, this issue has been a hotly debated topic for a number of years. There is a bias against discovery of evidence from outside of the administrative record, for a number of good reasons, including that it expands the scope and cost of LTD benefit litigation beyond the controlled, predictable amount that ERISA, and years of court decisions, instead treat as the norm. This type of discovery also runs contrary to years of decisions imposing a much more limited scope of litigation and discovery in these types of cases. That said, however, many courts have been expanding the scope of discovery and evidence allowed in these types of cases. I believe Demer is the highest profile decision to do so.

Third, I think there is no question that, from here on out, lawyers for participants will seek this information in almost every single LTD case in which outside medical reviewers were used. I don’t see how it would not now be malpractice for a lawyer not to seek such discovery. As a result, it may now be incumbent on all LTD insurers and claim administrators to ensure that structures are in place that will allow this type of information to both be easily compiled but also to be placed in context so that a court can see for itself whether or not the compensation of outside medical reviewers and the frequency of using those particular reviewers actually suggests bias in the benefit determination process. In other words, insurers and administrators should no longer act as though such discovery is unlikely, but instead as though it is likely to occur. This requires establishing IT protocols that make such data readily available. It also, though, means creating a system that puts the data of any given reviewer in context, so that an administrator can argue that a particular number of reviews in a given year or a particular level of compensation of a certain reviewer is meaningless and does not demonstrate or reflect that any bias or conflict of interest contaminated the administrator’s determination.